Ren Zone Policy Coming

July 21, 2006
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GRAND RAPIDS — The city’s Economic Development Department is wrapping up its work on a policy that would let a manufacturer located in the Renaissance Zone apply for an industrial tax abatement before the zone expires.

But to capture that waiver a company would have to prove to the city that it made an investment during its time in the nearly tax-free zone.

The first phase-out year of the first zone created by the city in 1997 is 2009. The zone gives companies full exemptions on most city and state taxes through 2008 and graduated waivers for the three following years.

Firms in that first zone will begin paying 25 percent of those taxes in 2009, 50 percent in 2010, and 75 percent in 2011. A company will go back on the tax rolls in 2012, if it doesn’t have an approved abatement.

The purpose of the city’s proposed policy is to encourage manufacturers and high-tech firms to continue investing in their businesses, and to give those companies some guidance through a zone’s phase-out period with an abatement for a set number of years.

What commissioners will likely be looking for from a zone applicant is the investment made in the property, the building and in personal property, the employment number at the start of the zone occupation and the current employment figure.

“That would give us a little history on what they have done in the zone,” said Susan Shannon, economic development director. “Then we would do a financial analysis.”

In reviewing an application, commissioners are likely to also consider the remaining number of years an applicant has in the zone and how much an applicant would save on property taxes over those years. Whatever that zone benefit is, it would be credited to the industrial exemption.

For instance, if a company would receive a maximum property tax exemption of $15,000 through the abatement and would save $7,000 on that levy through its remaining years in the zone, then that firm would get an abatement worth $8,000 over a set number of years after the zone expires. Most industrial tax abatements run for 12 years, but these would be active for a shorter period.

Other factors, besides the investment a company made, are also being considered in the policy. The number of jobs created or retained tops that list. Another factor is whether a project will be a catalyst for further development or if it will have an adverse impact on other businesses.

“This gives you some flexibility on the guidelines,” said Shannon at a recent city meeting, “and us some guidelines.”

The city is also interested in state legislation that would extend zone benefits, but only on a project-by-project basis rather than declaring an entire area a Renaissance Zone. And those projects, if approved for the zone, would likely get the same tax benefits but for fewer than the 15 years currently offered.

Since 1997, the zone’s first full year, the city has abated over $900,000 in taxes, and 2,080 jobs have been created from the investments made.

Deputy City Manager Eric DeLong said the city’s zones contain 580 properties. DeLong reported that some companies have made major investments in their properties, some have made a good investment, while others haven’t invested anything and have just taken the tax breaks.

Third Ward Commissioner James White said he was working closely with area legislators to make sure that new state legislation for a zone extension doesn’t financially hurt the city.

“We want to be protected,” said White. “We don’t want this legislation to just say start over again.”    

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